Hong Kong-based actor and director Stephen Chow takes on a crew of assorted gangsters in his latest comedy hit Kung Fu Hustle. He plays a hapless thief who tries to join a ruthless Chinese gang in the early 1900s. In just 45 days the movie raked in more than 60 million dollars - a blockbuster hit by anybody's standards. Film Historian David Cook at Emory University in the United States says the movie epitomizes Hong Kong's cinematic style.

"The style of the film and the style of the city have a lot in common, they're both extremely action oriented, aggressive, if I may say so, even flashy places," says Mr. Cook.

But Kung Fu Hustle's success is actually more the exception than the rule these days in an industry struggling to survive. Major investors are moving away and local filmmakers are suffering the consequences. In the 1980s Hong Kong produced nearly 300 movies a year. In 2005 only about 60 will get made. Filmmakers here say that if the local industry keeps shrinking Hong Kong could lose one if its key artistic venues and with it, a big part of its creative identity.

The first Chinese movie made in Hong Kong was shot in 1909, titled, To Steal a Roasted Duck. By the 1930s local filmmakers started producing about 15 to 20 movies a year. Film historian David Cook says the most popular were based on Chinese operas.

"They were essentially musicals, they were melodramas where popular singers would sing 10, 15 songs in the course of a film," says Mr. Cook.

The Japanese occupation of Hong Kong during World War II basically wiped out the industry until the 1950s when a new fad hit the industry: Wu Xia, or martial arts. But it was not until the early 1970s that Hong Kong's kung fu movies gained a global audience. And in 1972, a 32-year-old martial arts instructor starred in a low budget action movie called Fists of Fury.

The movie made American-born Bruce Lee an international star. It also fueled a huge demand for Hong Kong kung fu films. David Cook says Americans fell in love with the new Asian action hero.

"There was a period during in early 70s when martial arts movies were taking about 30 to 40 percent of the market share of all films released in the United States," says Mr. Cook.

For the next quarter century Hong Kong filmmakers kept at it, churning out scores of kung fu and gangster movies every year with titles like The Five Deadly Venoms and The Flying Guillotine. But in 1997 the rebounding film industry suffered the first in a series of major setbacks. That year's economic crash, which affected almost all of Asia, practically wiped out funding for local productions. At the same time, Hollywood blockbusters like The Titanic started to eat into the domestic market. Hong Kong's biggest names also started to work in America, where they could earn more money. Now it is video piracy that poses the biggest to Hong Kong's film industry with bootleg DVD's and on-line file sharing taking a huge chunk out of local profits.

Liz Shackleton covers Hong Kong film market for Screen International, a London-based trade paper. "Piracy is a massive problem," Says Ms Shackleton. "We currently have a level of piracy of about 20 percent, on the mainland it's 95 percent."

Hong Kong's government says it is doing what it can to protect the filmmakers cracking down on the illegal trade and distribution. But Ms. Shackleton says ending piracy will not solve all of the local industry's problems. To survive, she says, Hong Kong has to reclaim its share of the regional market. Local producers have their eyes on mainland China, and its 1.3 billion potential moviegoers. But it won't be easy. Along with its huge audience, China also has tough rules on what movies can - and cannot - show.

Films cannot show ghosts, no dead bodies, no gun shots in public places, nothing too scary, nothing too sexy and so on. If Hong Kong hopes to succeed in China - if it hopes to survive at all - local critics say it will have focus on quality and not just quantity. Big action scenes can't mask poor production values and weak screenplays. To regain its former glory, industry experts say Hong Kong has to slow down and stop going for the knockout punch. They say Kung Fu Hustle was a hit because of a good story and solid acting, and that, not the Kung Fu, is the key to success.